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Norms for compounding in cheque bounce cases

NEW DELHI: The Supreme Court has formulated guidelines to nudge litigants in cheque bounce cases to opt for compounding of offences during the early stages of the dispute without imposing costs on the accused.

The court said varying percentages of costs would be imposed on the accused if compounding of offences was opted for at different stages of appeal.

Punishment

Under the Negotiable Instruments Act, if a cheque is dishonoured for insufficiency of funds in the drawer's account or if it exceeds the amount arranged to be paid from that account, the drawer will be punished with imprisonment for a term which may extend to two years, or with a fine which may extend to twice the cheque amount or with both.

A Bench of Chief Justice K.G. Balakrishnan and Justices P. Sathasivam and J.M. Panchal, disposing of a batch of appeals, said compounding of offences might be allowed by the court at the first or second hearing without imposing costs on the accused.

If the accused made an application before the magistrate concerned at a subsequent stage, compounding could be allowed on condition that he deposited 10 per cent of the cheque amount with the Legal Services Authority.

If the application was made before the Sessions or High Court in revision or appeal, compounding might be allowed on the accused paying 15 per cent of the cheque amount.

If the application was made in the Supreme Court, the amount payable would increase to 20 per cent.